Late repayments from businesses at highest level since 2021

CreditorWatch’s Business Risk Index (BRI) for September has highlighted that late repayments are at their highest rate since the end of JobKeeper in March 2021.

The rate of B2B payments over 60 days in arrears rose 21.4 per cent year on year and 7.9 per cent since January, reflecting a combination of more challenging business conditions such as higher interest rates and higher cost of living, according to CreditorWatch.

Additionally, the BRI has observed decreases in discretionary spending and activity and demand, particularly in interest rate sensitive sectors, which include the construction and food & beverage sectors.

However, arrears still remain below the pre-COVID-19 period, which was marked by soft economic growth in the wake of the banking royal commission, which saw banks tightening lending standards.

According to CreditorWatch, this has suggested a softer economy in the present day, but not an “especially weak economy” overall, notwithstanding some variations in conditions sector by sector.

CreditorWatch CEO Patrick Coghlan said that deteriorating B2B payment times and the upward trend in payment defaults indicated that many businesses are still under considerable cash flow pressure.

“Ongoing economic impacts such as weaker consumer demand are clearly bringing more pressure to bear on Australian businesses,” Coghlan said.

“The fact that the construction and hospitality sectors have the highest rates of payment defaults and construction has the highest rates of arrears, mirrors the latest ABS data showing declining building approvals and flat spending in cafes and restaurants across much of 2024.”

In terms of economic outlook, CreditorWatch chief economist Ivan Colhoun said that interest rates, cost of living, and low unemployment were among the various factors that will influence the economic trajectory.

“In the short term, there are some tentative signs of support flowing through the economy from the 1 July tax cuts, with improved Consumer Confidence in early October, stronger Retail Sales in August and businesses reporting slightly stronger business conditions in the NAB Business Survey in September,” Colhoun said.

“Latest RBA communications reinforce the message that further progress lowering inflation will be required before Australian interest rates can be reduced.

“Those conditions are expected to be in place in early 2025. Recent interest rate reductions by overseas central banks and a significant Chinese economic stimulus package increase the chances of global economic growth experiencing a soft landing, where inflation moderates, unemployment does not rise significantly, and most economies experience slower growth but not recession.”

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Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

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